Econ 202M - Final Exam

Reference: Ref 5-13 (Figure: The Market for MP3 Players) Look at the figure The Market for MP3 Players. Assume that Sd represents the domestic supply curve and Dd represents the domestic demand curve. In the market for MP3 players, the autarky price equals:

$110.

(Scenario: A Small-Town Monopolist) Use Scenario: A Small-Town Monopolist. If this monopolist must choose between selling 100 or 175 subscriptions, it will choose to sell _____ units at a price of _____ and earn economic profits equal to _____. Scenario: A Small-Town Monopolist A monopolist sells cable subscriptions in a small town and finds that it can sell 100 subscriptions when the price is $15 a week and 175 subscriptions when the price is $10 a week. The MC for the provision of the cable is $5 a week. There are no fixed costs.

100; $15; $1,000

If a perfectly competitive firm decreases production from 11 units to 10 units and the market price is $20 per unit, total revenue for 10 units is:

200

Scenario: The Production of Wheat and Toys The table describes the production of two goods, wheat and toys, in country A and country B. Each country has a linear production possibility frontier with respect to its production of the two goods. The numbers in each column represent the total number of units each country could produce if it used all of its resources to produce the good. Reference: Ref 5-24 (Scenario: The Production of Wheat and Toys) Look at the scenario Production of Wheat and Toys. The opportunity cost of producing a unit of wheat in country B is:

3 toys.

Reference: Ref 5-2 (Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost in Mexico of producing 10 units of machinery is _____ units of petroleum.

30

A business produces 10 pairs of eyeglasses. It incurs $30 in average variable cost and $35 in average total cost. The total fixed cost of producing 10 pairs of eyeglasses is:

50

(Scenario: Tom's Budget Constraint) Use Scenario: Tom's Budget Constraint. The combination of _____ music downloads and _____ movies lies ON Tom's budget line. Scenario: Tom's Budget Constraint Tom is trying to decide how to allocate his $50 budget for music downloads and online movie streaming when the price of a music download is $1 and the price of a movie is $5.

50, 0

Figure: The Market for Laptop Sleeves Reference: Ref 5-19 (Figure: The Market for Laptop Sleeves) Look at the figure The Market for Laptop Sleeves. Assume that S and D are the domestic supply and demand curves and the world price is PW. Identify the area of consumer surplus when a tariff raises the domestic price from the world price to PT.

A + B

Coca-Cola's Vast Market share int he soft drink market

Brand Loyalty

Which scenario is MOST likely to cause firms to exit a perfectly competitive industry?

Consumer income falls.

In which situation does overt collusion take place?

Firms in an industry agree openly on price and output, and they jointly make other decisions aimed at achieving monopoly profits.

Reference: Ref 5-5 (Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The Production Possibilities for Tractors and Crude Oil. _____ has (have) an absolute advantage in producing crude oil.

Mexico

If the price is below average total cost, then in the short run a perfectly competitive firm should:

There is not enough information given to answer this question.

When perfect competition prevails, which characteristic of firms are we likely to observe?

They are all price takers.

A group of sellers who agree to restrict their collective output in order to drive up prices above marginal cost is cartel

True

To be called an oligopoly, an industry must have:

a small number of interdependent firms.

The demand curve for a monopoly is:

above the MR curve.

The demand curve for a monopoly is:

also the industry demand curve.

Most economic models:

assume that people behave rationally.

A perfectly competitive industry is said to be efficient because the:

average total cost of production of the industry's output is minimized in the long run.

(Scenario: Two Identical Firms) Use Scenario: Two Identical Firms. If one firm decides to cheat, the cheating firm will: Scenario: Two Identical Firms Two identical firms make up an industry in which the market demand curve is represented by Q = 5,000 - 4P, where Q is the quantity demanded and P is price per unit. The marginal cost of producing the good in this industry is constant and equal to $650. Fixed cost is zero.

be able to increase its profits initially.

Assume that a tariff is imposed on Chinese imports into the United States. This tariff is likely to _____ U.S. producers and _____ Chinese producers.

benefit; penalize

Marginal cost _____ over the range of increasing marginal returns and _____ over the range of diminishing marginal returns.

decreases; increases

In the short run, the average total cost curve slopes upward because of:

diminishing returns.

Large barriers to entry are one reason that a monopoly:

earns an economic profit in the long run.

The purpose of the trusts established in the United States in the late 1800s was to:

engage in monopoly pricing.

If firms are taking economic losses in the short run, then in the long run, firms will leave the industry, industry output will _____, and economic losses will _____.

fall; decrease

Once diminishing returns have set in, as output increases, the total cost curve:

gets steeper.

If total utility is rising as more salsa is consumed, we can definitely say that marginal utility is:

greater than zero.

To say that you can't have too much of a good thing means that, for any good that you enjoy (for example, pizza):

higher consumption will always lead to higher utility.

Price discrimination leads to a _____ price for consumers with a _____ demand.

higher; less elastic

If a perfectly competitive firm is producing a quantity where P > MC, then the firm can increase profit by:

increasing production.

If your firm is operating in the negatively sloped portion of a long-run average total cost curve, then your production exhibits:

increasing returns to scale.

Sri Lanka's comparative advantage over the United States in textiles can be explained by its:

labor abundance.

To maximize her grade in economics, Stacey should study until her:

marginal benefit of studying equals her marginal cost of studying.

The GoSports Company is a profit-maximizing firm with a monopoly in the production of school team pennants. The firm sells its pennants for $10 each. We can conclude that GoSports is producing a level of output at which:

marginal cost equals marginal revenue.

The infant industry argument for trade protection states that:

new industries should be protected from foreign competition until they become established.

The following statement is a positive statement or normative statement? Society should take measures to prevent people from engaging in dangerous personal behavior.

normative statement

When a market begins to engage in international trade

producers in the exporting industry may be better off.

According to the substitution effect, a decrease in the price of a product leads to an increase in the quantity of the product demanded because buyers:

purchase more of the now less expensive good.

When marginal cost is ABOVE average variable cost, average variable cost must be:

rising.

The perfectly competitive model does NOT assume:

that firms attempt to maximize their total revenue.

You own a deli. Which input of production is MOST likely fixed at your deli?

the dining room

Suppose a monopoly can separate its customers into two groups. If the monopoly practices price discrimination, it will charge the lower price to the group with:

the higher price elasticity of demand.

You own a small deli that sells sandwiches, salads, and soup. Which factor is an implicit cost of the business?

the job offer you did not accept at a local catering service

Price discrimination can occur if:

the market structure is monopolistic competition.

The implicit cost of capital is:

the opportunity cost of capital used by a business.

The total cost curve shows how _____ cost depends on the quantity of _____.

total; output

Buford Bus Manufacturing installs a new assembly line. As a result, the output per worker increases. The marginal cost of output at Buford:

will decrease (the MC curve will shift down).